The Chinese enterprise Tencent posted an enticing revenue in its second quarter of 2019. It recorded a 35% increase in its profit to $3.5 Billion. The jump of numbers is due to the long shot in the gaming revenue that accounts for 30% of the Shenzen based company.
Earlier, the Chinese government halted games approvals for monetization that led to the snail pace growth in its first-quarter growth. During the period, Tencent who became public in 2014 wiped off billions of dollars in 2018. While it again lost $11.7 Billion from its market cap after it shared a cautious note.
James Mitchell, the Chief Strategy Officer of the company said “Our assumption is that the macro environment will remain difficult for the rest of the year and that the situation of the heavy supply of advertising inventory will continue for the rest of the year and potentially into next year”
The company is striving to diversify itself. It has ushered into the areas of financial and cloud computing business. It’s business from WeChat Pay, wealth management product saw a rise of 37% revenue in the second quarter. However, it reported a slow pace growth in the advertisement business of 16% this quarter. While it recorded a 25% surge in the revenue last quarter.
“The challenging macro environment and increased supply of short video advertising inventories across the industry. We expect the negative impact from the current business environment will persist in the second half of 2019,” he said in the earnings call.
Tencent launched 10 games this quarters that include Game of Peace/Peacekeeper Elite which is similar to PUBG. It has already attracted 50 Milion users which will boost the revenue next quarters. Looking forward to its Capital expenditure/investment, it was down by 38% since last quarter.
China’s advertising market is slowing down. It’s spent on the digital ad is expected to hit $79.89 Billion which is 22% growth since last year but plummeting by 6% from the year before 2018.